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In the ever-growing world of DeFi, there are countless opportunities for you to earn money apart from simply “HODLing” a cryptocurrency for an eternity. If you are looking to earn some passive income on cryptos you already own, then look no further because I would be breaking down some money-making methods in the DeFi space.

Some methods widely used in the DeFi space are:

1. Staking

2. Yield Farming

3. Crypto Lending

In part 1 of this 2-parts article, I will be touching on the simplest and easiest way to get started on generating passive income from your crypto holdings through the process of staking on centralized exchanges (CEX)

I will then proceed to talk about a more advanced level, called yield farming, which could potentially generate you interest of >100% per annum (vs. your 0.05%/annum savings account interest. Yeah!) But of course, do note the saying of “greater returns, greater risks” definitely still applies here.

In Part 2, I will talk about generating higher passive income by lending your blue-chip coins such as BTC and ETH to lending platforms vs. staking them on CEX, with the former allowing you to generate up to 10%/annum on some of these blue-chip tier-1 coins such as Avalanche vs. the 1% through CEX.

I will wrap up Part 2 with a quick disclosure of where I am currently generating passive income from my crypto holdings. Do note that there are a lot of methods to earn passive income with crypto but I am just highlighting the seemingly “lower risks” ones.

Do note again that investing in cryptocurrencies, at the end of the day, is still a high-risk venture and do not simply be enticed by the “high returns” for many of these crypto opportunities without being fully aware that the interest that you generate from these high yield opportunities might ultimately be more than offset by substantial declines in crypto prices.      

Without further ado, let’s get started on the very first method to earn passive income with crypto. I will also provide a detailed step-by-step rundown on the process to generate this income.

Additional Reading: Best Cryptocurrency Exchanges in Singapore

Passive Income With Crypto #1: Staking

To simply put it, Staking is a process where you lock up your crypto assets to earn interest, similar to how you would put money in a fixed deposit and earn interest. When you stake your crypto, it goes towards helping a blockchain network validate transactions. Does this sound familiar? Yes, it is essentially the proof-of-stake concept.

Whenever a new block is created by validating transactions, new cryptocurrencies are minted and rewarded to the validator. A factor that influences the chances of a validator being selected to validate a block is the value of cryptocurrencies staked.

To increase the chance of being selected and earning rewards, there is what’s called a staking pool where multiple stakeholders pool together their cryptos. The block rewards will then be distributed according to your percentage contribution to that pool. It is important to note that most staking pools would also charge a small fee.